Associated Press
07.08.2004

Internet stocks tumbled in morning trading Thursday as investors continued a rapid sell-off of shares after Yahoo Inc. issued a disappointing second-quarter earnings report late Wednesday.

Though Yahoo nearly doubled its second-quarter revenue to $832.2 million, the company's earnings came in at 8 cents per share, failing to beat Wall Street estimates. Investors reacted sharply, driving Yahoo down 11 percent in after-hours trading.

Shares of Yahoo fell 5 percent, or $1.63, to $30.97 on nearly twice its average volume Thursday on the Nasdaq National Stock Market.

Traders set high expectations for Yahoo after the company posted better-than-expected first-quarter earnings in April, sparking a run-up in the dot-com sector this spring.

Talk has circulated of potential overvaluation of Internet stocks, but some analysts said they felt Yahoo was fairly valued and did not expect a market correction unless the company's earnings came in well below estimates.

Despite reporting a threefold increase in marketing revenue, Yahoo - considered a benchmark for the Internet advertising market - led an overall decline among other advertising-driven dot-com stocks.

Search engines Ask Jeeves Inc. and Looksmart Ltd. were both hurt on the news, with Ask Jeeves dropping 5 percent, or $1.74, to $32.68 and Looksmart down 2.8 percent, or 6 cents, to $2.05 in morning trading.

Mamma.com Inc. fell 2.7 percent, or 23 cents, to $8.30, while Web portal CNET Networks Inc. dropped 1.8 percent, or 18 cents, to $9.70.

Meanwhile, online advertising firm DoubleClick Inc. saw a slight gain of 1.1 percent, or 8 cents, to $7.26 during morning activity on the Nasdaq.

Other Internet giants saw declines in morning trading, with Amazon.com Inc. down 2.5 percent, or $1.26, to $49.74, eBay Inc. down 2.5 percent, or $2.17, to $84.70 and Overstock.com Inc. falling 1.4 percent, or 52 cents, to $37.75.

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